Canadian-American Reciprocity Treaty
Encyclopedia
The Canadian American Reciprocity Treaty, also known as the Elgin
-Marcy
Treaty, was a trade treaty between the colonies of British North America
and the United States
. It covered raw materials and was in effect from 1854 to 1865. It represented a move toward free trade, and was opposed by protectionist elements in the United States, who joined with Americans angry at apparent British support for the Confederate States of America
during the American Civil War
, ended it in 1866. The solution for most leaders in British North America became confederation into the Dominion of Canada (1867), which supposedly would open up many new economic opportunities inside Canada. Attempts by the Liberal Party of Canada
to revive free trade in 1911 led to a political victory
for Conservatives who warned that Canada would be swallowed up by its giant neighbor. Talk of reciprocity was put on hold for decades.
(tariffs on food imported into Britain) were repealed in 1846, the Canadian business community, based in Montreal, looked south. Merchants threatened to push for annexation to the U.S. unless London negotiated a free trade deal with Washington. In 1854, they achieved what they wanted in the Elgin-Marcy Treaty. It listed most Canadian raw materials and agricultural produce—especially timber and wheat—as goods admitted duty-free to the U.S. market. The treaty ended the American 21% tariff on natural resource imports. In exchange, the Americans were given fishing rights off the east coast. The treaty also granted a few navigation rights to each others lakes and rivers.
The treaty represented an attempt by American manufacturers, on the one hand, to enlarge their export market and to obtain cheaper raw materials, anshaned an attempt by free traders, tariff reformers, and their Democratic party allies, on the other, to lower the tariff. The protected interests, mobilized in the Republican Party
, fought back.
In 1968 this optimistic view was challenged by economic historians. (Officer and Smith, 1968). They argued that the growth of trade was caused by the introduction of railways to Canada and by the American Civil War
leading to huge demand in the United States. They also argue the statistics are questionable. Before the tariffs, much smuggling took place. Free trade brought this trade into the open, but this increase in recorded trade did not actually reflect growth in the economy. In 1855, there were poor wheat harvests in the United States and Britain. It also saw Russian wheat supplies cut off by the Crimean War
. This led to a great year for Canadian wheat, independent of the introduction of the tariff. It was also argued that the trade hurt Canadian manufacturing. For instance, the export of milk and barley hurt the Canadian cheese and beer trades. Scholars now generally hold that the economic prosperity that followed the treaty was largely the result of these other factors.
The treaty did stimulate the coal mining industry in Nova Scotia
. That colony was already moving toward free trade before the 1854 treaty took effect, but that the treaty still resulted in modest direct gains. The structure of the economy changed because markets for some commodities, such as coal increased greatly; the demand for other goods was unchanged. The Reciprocity Treaty complemented the earlier movement toward free trade and stimulated the export of commodities sold primarily to the United States.
imposed by the Province of Canada
on manufactured goods. Also the US was angry at the British for having unofficially supported the South in the Civil War.
The state of Maine, given its location, was a key player. The treaty benefited Portland's trading position with respect to Montreal and the Canadian hinterland, but many Maine politicians and businessmen nevertheless worked successfully to terminate the treaty. Many voters were angry with Canadian behavior during the Civil War. There was complacency on the part of Portland railroad interests, and the Bangor lumber interests oppose the continental economic integration envisaged by the treaty.
While Canada attempted to negotiate a new reciprocity treaty, the Americans were committed to high tariffs and would not agree. Eventually, John A. Macdonald
set up a Canadian system of tariffs known as the National Policy
. In 1911, a free trade agreement between Wilfrid Laurier
's Liberals and the Americans was rejected by the electorate in the 1911 election
.
After 1945 both nations joined the General Agreement on Tariffs and Trade
(GATT) and tariffs began to steadily decline. Free trade between the two nations was finalized by the 1988 Canada-US Free Trade Agreement.
"), succeeded in associating the Liberals with free trade, commercial union with the U.S., and continentalism, which smacked of absorption by the U.S.. The Liberal government of Sir Wilfrid Laurier
succeeded in signing a reciprocity treaty with American president William Howard Taft
. The conservatives made it the central issue of the 1911 election, igniting anti-American sentiment by dire warnings the treaty would turn the economy over to American control. The Liberals were decisively defeated and the treaty was rejected.
James Bruce, 8th Earl of Elgin
Sir James Bruce, 8th Earl of Elgin and 12th Earl of Kincardine, KT, GCB, PC , was a British colonial administrator and diplomat...
-Marcy
William L. Marcy
William Learned Marcy was an American statesman, who served as U.S. Senator and the 11th Governor of New York, and as the U.S. Secretary of War and U.S. Secretary of State.-Early life:...
Treaty, was a trade treaty between the colonies of British North America
British North America
British North America is a historical term. It consisted of the colonies and territories of the British Empire in continental North America after the end of the American Revolutionary War and the recognition of American independence in 1783.At the start of the Revolutionary War in 1775 the British...
and the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
. It covered raw materials and was in effect from 1854 to 1865. It represented a move toward free trade, and was opposed by protectionist elements in the United States, who joined with Americans angry at apparent British support for the Confederate States of America
Confederate States of America
The Confederate States of America was a government set up from 1861 to 1865 by 11 Southern slave states of the United States of America that had declared their secession from the U.S...
during the American Civil War
American Civil War
The American Civil War was a civil war fought in the United States of America. In response to the election of Abraham Lincoln as President of the United States, 11 southern slave states declared their secession from the United States and formed the Confederate States of America ; the other 25...
, ended it in 1866. The solution for most leaders in British North America became confederation into the Dominion of Canada (1867), which supposedly would open up many new economic opportunities inside Canada. Attempts by the Liberal Party of Canada
Liberal Party of Canada
The Liberal Party of Canada , colloquially known as the Grits, is the oldest federally registered party in Canada. In the conventional political spectrum, the party sits between the centre and the centre-left. Historically the Liberal Party has positioned itself to the left of the Conservative...
to revive free trade in 1911 led to a political victory
Canadian federal election, 1911
The Canadian federal election of 1911 was held on September 21 to elect members of the Canadian House of Commons of the 12th Parliament of Canada.-Summary:...
for Conservatives who warned that Canada would be swallowed up by its giant neighbor. Talk of reciprocity was put on hold for decades.
Origins
Faced with the ending of British imperial preference when the British Corn LawsCorn Laws
The Corn Laws were trade barriers designed to protect cereal producers in the United Kingdom of Great Britain and Ireland against competition from less expensive foreign imports between 1815 and 1846. The barriers were introduced by the Importation Act 1815 and repealed by the Importation Act 1846...
(tariffs on food imported into Britain) were repealed in 1846, the Canadian business community, based in Montreal, looked south. Merchants threatened to push for annexation to the U.S. unless London negotiated a free trade deal with Washington. In 1854, they achieved what they wanted in the Elgin-Marcy Treaty. It listed most Canadian raw materials and agricultural produce—especially timber and wheat—as goods admitted duty-free to the U.S. market. The treaty ended the American 21% tariff on natural resource imports. In exchange, the Americans were given fishing rights off the east coast. The treaty also granted a few navigation rights to each others lakes and rivers.
The treaty represented an attempt by American manufacturers, on the one hand, to enlarge their export market and to obtain cheaper raw materials, anshaned an attempt by free traders, tariff reformers, and their Democratic party allies, on the other, to lower the tariff. The protected interests, mobilized in the Republican Party
History of the United States Republican Party
The United States Republican Party is the second oldest currently existing political party in the United States after its great rival, the Democratic Party. It emerged in 1854 to combat the Kansas Nebraska Act which threatened to extend slavery into the territories, and to promote more vigorous...
, fought back.
Effects
Historians have agreed the impact was small for the U.S. but have debated its effects on Canada. After the treaty took effect there was a large increase in Canada's exports to the United States, and a rapid growth of the Canadian economy, especially in southern Ontario. Canadian exports to the United States grew by 33% after the treaty, while Americans exports only grew by 7%. Within ten years trade had doubled between the two countries. For nearly a century Canadian economists saw the reciprocity era as a halcyon period for the Canadian economy.In 1968 this optimistic view was challenged by economic historians. (Officer and Smith, 1968). They argued that the growth of trade was caused by the introduction of railways to Canada and by the American Civil War
American Civil War
The American Civil War was a civil war fought in the United States of America. In response to the election of Abraham Lincoln as President of the United States, 11 southern slave states declared their secession from the United States and formed the Confederate States of America ; the other 25...
leading to huge demand in the United States. They also argue the statistics are questionable. Before the tariffs, much smuggling took place. Free trade brought this trade into the open, but this increase in recorded trade did not actually reflect growth in the economy. In 1855, there were poor wheat harvests in the United States and Britain. It also saw Russian wheat supplies cut off by the Crimean War
Crimean War
The Crimean War was a conflict fought between the Russian Empire and an alliance of the French Empire, the British Empire, the Ottoman Empire, and the Kingdom of Sardinia. The war was part of a long-running contest between the major European powers for influence over territories of the declining...
. This led to a great year for Canadian wheat, independent of the introduction of the tariff. It was also argued that the trade hurt Canadian manufacturing. For instance, the export of milk and barley hurt the Canadian cheese and beer trades. Scholars now generally hold that the economic prosperity that followed the treaty was largely the result of these other factors.
The treaty did stimulate the coal mining industry in Nova Scotia
History of Nova Scotia
Nova Scotia is a Canadian province located in Canada's Maritimes. The region was initially occupied by Mi'kmaq. During the first 150 years of European settlement, the colony was primarily made up of Catholic Acadians and Mi'kmaq...
. That colony was already moving toward free trade before the 1854 treaty took effect, but that the treaty still resulted in modest direct gains. The structure of the economy changed because markets for some commodities, such as coal increased greatly; the demand for other goods was unchanged. The Reciprocity Treaty complemented the earlier movement toward free trade and stimulated the export of commodities sold primarily to the United States.
End of treaty
The treaty was abrogated by the Americans in 1866 for several reasons. Many felt that Canada was the only nation benefiting from it, and because they objected to the protective Cayley-Galt TariffCayley-Galt Tariff
The Cayley-Galt Tariff of 1858 was the first protective tariff in Canadian history. It imposed duties on imported manufactured goods of 20% and a duty of 10% on partially manufactured goods in an attempt to spur domestic manufacturing industries....
imposed by the Province of Canada
Province of Canada
The Province of Canada, United Province of Canada, or the United Canadas was a British colony in North America from 1841 to 1867. Its formation reflected recommendations made by John Lambton, 1st Earl of Durham in the Report on the Affairs of British North America following the Rebellions of...
on manufactured goods. Also the US was angry at the British for having unofficially supported the South in the Civil War.
The state of Maine, given its location, was a key player. The treaty benefited Portland's trading position with respect to Montreal and the Canadian hinterland, but many Maine politicians and businessmen nevertheless worked successfully to terminate the treaty. Many voters were angry with Canadian behavior during the Civil War. There was complacency on the part of Portland railroad interests, and the Bangor lumber interests oppose the continental economic integration envisaged by the treaty.
While Canada attempted to negotiate a new reciprocity treaty, the Americans were committed to high tariffs and would not agree. Eventually, John A. Macdonald
John A. Macdonald
Sir John Alexander Macdonald, GCB, KCMG, PC, PC , QC was the first Prime Minister of Canada. The dominant figure of Canadian Confederation, his political career spanned almost half a century...
set up a Canadian system of tariffs known as the National Policy
National Policy
The National Policy was a Canadian economic program introduced by John A. Macdonald's Conservative Party in 1876 and put into action in 1879. It called for high tariffs on imported manufactured items to protect the manufacturing industry...
. In 1911, a free trade agreement between Wilfrid Laurier
Wilfrid Laurier
Sir Wilfrid Laurier, GCMG, PC, KC, baptized Henri-Charles-Wilfrid Laurier was the seventh Prime Minister of Canada from 11 July 1896 to 6 October 1911....
's Liberals and the Americans was rejected by the electorate in the 1911 election
Canadian federal election, 1911
The Canadian federal election of 1911 was held on September 21 to elect members of the Canadian House of Commons of the 12th Parliament of Canada.-Summary:...
.
After 1945 both nations joined the General Agreement on Tariffs and Trade
General Agreement on Tariffs and Trade
The General Agreement on Tariffs and Trade was negotiated during the UN Conference on Trade and Employment and was the outcome of the failure of negotiating governments to create the International Trade Organization . GATT was signed in 1947 and lasted until 1993, when it was replaced by the World...
(GATT) and tariffs began to steadily decline. Free trade between the two nations was finalized by the 1988 Canada-US Free Trade Agreement.
Political effects
From 1867 to 1911, regaining reciprocity was an aim of all Canadian governments. Political rhetoric made it a party issue: the Conservative party, which stood publicly for nationalism and protectionism ("the National PolicyNational Policy
The National Policy was a Canadian economic program introduced by John A. Macdonald's Conservative Party in 1876 and put into action in 1879. It called for high tariffs on imported manufactured items to protect the manufacturing industry...
"), succeeded in associating the Liberals with free trade, commercial union with the U.S., and continentalism, which smacked of absorption by the U.S.. The Liberal government of Sir Wilfrid Laurier
Wilfrid Laurier
Sir Wilfrid Laurier, GCMG, PC, KC, baptized Henri-Charles-Wilfrid Laurier was the seventh Prime Minister of Canada from 11 July 1896 to 6 October 1911....
succeeded in signing a reciprocity treaty with American president William Howard Taft
William Howard Taft
William Howard Taft was the 27th President of the United States and later the tenth Chief Justice of the United States...
. The conservatives made it the central issue of the 1911 election, igniting anti-American sentiment by dire warnings the treaty would turn the economy over to American control. The Liberals were decisively defeated and the treaty was rejected.